By Martin KidstonSeptember 2, 2017

The class-action lawsuit originated with Ernie Watters, who later retired from the department with the rank of detective, and grew to include 142 active-duty and retired officers. (Ed Kemmick/Last Best News)

A Montana Supreme Court ruling will send back to District Court a lawsuit filed against the city of Billings by a group of current and retired city police officers.

The ruling came down this week, just shy of a year after the city was dinged for more than $2.7 million in back pay, fines and legal fees. The suit was filed in 2009 by 27 police officers, who said the city had incorrectly calculated their longevity pay, going back as far as 1994.

The class-action lawsuit originated with Ernie Watters, who later retired from the department with the rank of detective, and grew to include 142 active-duty and retired officers. Last year, District Court Judge Brenda Gilbert of Livingston ordered the city to pay $932,960.90 in back wages, plus a 110 percent penalty of $1,026,256.99. She also awarded attorneys’ fees of $653,072.63 and costs of $125,854.60, for a total of $2,738,145.12.

The city appealed to the state Supreme Court, resulting in Monday’s ruling. Justice James Rice, writing for the majority, said the city raised six issues in its appeal, but the court ruled on only one of them. The court, he said with no further explanation, chose not to “address the additional issues.”

The issue it did rule on was the question of whether the District Court erred by holding that the collective bargaining agreements between the city and its police union were unambiguous and whether the court was right in excluding outside evidence regarding the interpretation of those agreements.

The case was originally heard by District Court Judge Nels Swandal, of Livingston, and after his retirement was handled by Gilbert.

The non-jury trial was moved to Livingston because Watters is married to U.S. District Court Judge Susan Watters, who was still a Yellowstone County district judge when the suit was filed. All the other judges in the county recused themselves from the case because of that relationship.

The case hinged on the interpretation of contract language regarding longevity pay. The officers said the wording of one of their three-year contracts made it plain that longevity should have been calculated from their first day on the job. The city argued that the calculation should have excluded their first year of service.

Two other contracts from the same period, in the 2000s, made the city’s position clear, the high court said in the ruling, and the police union agreed with the city’s interpretation and was not a party to the suit.

The police lawsuit said the contract language was unambiguous and needed no outside interpretation, a point that Swandal agreed with. The city said the fact that the language regarding longevity was changed in later contracts made “the introduction of extrinsic evidence … necessary to interpret them.”

Swandal ruled that “there can be no reasonable argument” that the collective bargaining agreements “plainly state and mean anything other than that longevity shall be added to each officer’s hourly rate. … There is no need for extraneous or parol evidence.”

Rice, in the high court’s opinion, said Swandal, at the end of his order, went on to offer examples of how longevity was to be determined under the police contracts. After Swandal retired, the equations he offered as examples became known as “the Swandal formula,” even though his examples were not based on contract language and “significantly altered the litigation going forward.”

And though Swandal and later Gilbert said the contract language needed no interpretation, Rice wrote, Swandal’s own finding was based on outside or “extrinsic” evidence, including “a purported internal City memorandum.”

Because the city’s interpretation of the contract language differed that of the police officers, Rice wrote, and because both interpretations were reasonable, there clearly was legal ambiguity involved.

“The District Court’s legal analysis was inherently contradictory and legally incorrect,” Rice wrote. “Although concluding as a matter of law that the subject CBAs (collective bargaining agreements) contained no ambiguity and could be resolved on their plain language, the District Court nonetheless considered and relied upon extrinsic evidence to interpret the CBAs.”

He continued: “It was an error of law to rely on extrinsic evidence in favor of the Officers, while imposing a blanket exclusion upon the extrinsic evidence offered by the City.” The high court sent the case back to District Court for “consideration at trial of extrinsic evidence about the parties’ intent” in regard to the contract language.

In a dissent, Wheat said he agreed with the District Court’s interpretation of the plain language of the contract.

“Additionally,” he said, “I believe the Court is remiss in failing to address other issues raised by the parties on appeal. Those issues, including but not limited to the proper statute of limitations, the appropriate class members based upon accrual date, and certain damage awards, are likely to be raised and/or challenged in the subsequent proceeding on remand and may very well be subject to a subsequent appeal. As these issues are currently before this Court, they should be resolved prior to remand.”

The police officers were represented by Randy Bishop, a Billings lawyer, and Lawrence Anderson, of Great Falls. The city was represented by James Goetz, of Bozeman, and W. Anderson Forsythe and Afton E. Ball, of the Moulton Bellingham law firm in Billings.

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